If you are a foreign individual and you are selling your property, or if you are a buyer purchasing a property from a foreign seller, then you will most likely be subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
In a FIRPTA real estate transaction, 10% of the sales price is withheld from the sellers’ proceeds by the IRS until their tax return is filed the following year. The reason behind FIRPTA is to ensure the foreign seller pays the taxes on the proceeds for the property. Before FIRPTA was enacted, the federal government had no procedure to ensure these taxes were paid, as many foreign sellers of real estate had no further connections to the US after the sale of their property.
It is ultimately the buyer’s responsibility to ensure the FIRPTA real estate transaction process is properly conducted. If the buyer does not properly conduct the FIRPTA process, then they could be subject to penalties for the taxes not paid by the seller.
Here at Boyer Law Firm, we specialize in conducting real estate transactions with both foreign sellers and buyers and have performed multiple closings involving FIRPTA transactions. We not only are familiar with the process, but we work with CPAs who are also familiar with the FIRPTA process to ensure that both the buyer and seller meet all of the FIRPTA requirements so no future complications or consequences arise.
We have seen first-hand the unnecessary additional work that can arise when a FIRPTA transaction is not properly conducted.
Selling a property that involves a FIRPTA transaction requires early preparation to ensure timely action, even before listing the property for sale. Although there are many companies who are able to conduct real estate closings in the state of Florida, there are many advantages to hiring our firm to conduct your real estate closing, including the legal expertise that only an attorney can provide.